How the MSME Sector Benefited from Budget (2021-22)

Direct:

1. Allocation to the Ministry of MSME : The Finance Minister has provided Rs 15,700 crores to this sector, more than double of this year’s budget estimate is laudable

2. Capital and turnover limit increased : The concept of small company was introduced under Section 2(85) of the Companies Act which had earlier defined a company as small company if

• It has a paid up share capital of not more than INR 50 Lakh or such higher amount as may be prescribed which shall not be more than INR 10 Cr
• It has an annual turnover of not more than INR 2 Cr or such higher amount as may be prescribed which shall not be more than INR 100 Cr.

It must be noted that a public company, a subsidiary of another company, Section 8 Company or a company governed under any Special Act will by default not be recognized as a small company regardless of the above criteriaMSME definition under MSME act amended w.e.f 1st July 2020 :

Composite Criteria: Investment in Plant & Machinery/equipment and Annual Turnover

3. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)

Under the scheme, collateral-free credit (fund and non fund-based) extended by eligible financial institutions to new and existing micro and small enterprises, up to a limit of Rs 200 lakh (Rs 2 crore), are eligible to be covered by the fund trust.4. Standup India

“Financial Inclusion: To further facilitate credit flow under the scheme of Stand Up India for the Scheduled Caste and Scheduled Tribes and also women, FM proposed to reduce the margin money requirement from 25% to 15% only and also include loans for activities in allied activities in agriculture,”5. Easier debt resolution for small companies

The finance minister announced the creation of a special framework for MSMEs for debt resolution. To resolve cases faster, the NCLT framework will also be strengthened including the implementation of the e-Courts system, she said.
Public procurement is often complicated and MSME suppliers are at a receiving end leading to long drawn legal disputes. The Budget proposes setting up of a ‘Conciliation Mechanism’ with mandate of its use for quick resolution of contractual disputes.6. Starup sector

Indirect:

1. Investment in infrastructure The Budget signals a massive investment in infrastructure (highways, ports, waterways, power etc) and push for low cost housing. It opens up huge demand not only for the primary producers but MSME products as well.

2. Simplify further Direct Tax Compliance : The announcement of a faceless dispute resolution system should help taxpayers by fast-tracking the resolution process. The pre-filled capital gains and interest income in ITRs will make income tax filing easier for retail investors. Overall, these measures announced in the budget will simplify the lives of small taxpayers

These include a dispute resolution committee for small taxpayers, a faceless income tax appellate tribunal (ITAT), addressing double taxation concerns for non-resident Indians, exempting senior citizens from income tax return filing, and reducing the reassessment window to three years from six years in normal cases.

Budget 2021 also facilitates the ease of doing business, particularly for new and small businesses, by enhancing the threshold for applicability of tax audit 5 to 10 crores if the cash receipts are limited to 5%.3. Indirect tax towards simplification

On indirect tax front, the government has recently taken various measures towards ease of doing business and ease in carrying out GST compliances, like filing of nil returns through SMS, introduction of e-invoicing, and availability of pre-filled returns online among others.
This has been further supplemented by self-certification along with annual returns. The current budget has further introduced provisions linking the credit directly with furnishing of return by the supplier as one of the preconditions for availing credit.4. Lighter Compliance Burden

MCA-21 version 3.0 : Furthermore, Sitharaman said that a revamped version of the Ministry of Corporate Affairs web portal will be launched — MCA-21 version 3.0 — driven with data analytics, artificial intelligence, and machine learning.5. Govt reduces/ rationalise customs duty on certain items to provide relief to MSMEs

The customs duty on semis, flat, and long products of non-alloy, alloy, and stainless steels for the benefit of the MSMEs hard hit by the corona virus pandemic has been reduced to 7.5 per cent uniformly.

To provide relief to metal recyclers, mostly MSMEs, I am exempting duty on steel scrap for a period up to March 31, 2022. Further, I am also revoking ADD and CVD on certain steel products,” the minister said while presenting the budget.
For copper recyclers, the customs duty on copper scrap has been reduced to 2.5 per cent from 5 per cent.

For the textile industry and MSMEs in the textile industry nylon chain has been made in par to polyester and other artificial fabrics as part of rationalizing duty on raw materials. Duty on steel screws and plastic builder wares has been increased from 10 per cent to 15 per cent while on prawn feed it has increased to 15 per cent from 5 per cent.
To incentive exporters of garments, leather and handicraft items that are primarily made by MSMEs the budget has announced the withdrawal of exemptions on imports of some types of leathers as they are manufactured domestically in quality and quantity.
Custom duty on finished synthetic gemstones has also been increased to encourage its domestic processing.